Govt moves to wind up major loss-making PSUs like Air India

Union government officials are meeting today to discuss proposals to shut down some loss-making state-owned companies, risking a conflict with powerful trade unions.

Despite occasional attempts at privatisation, the central government still owns about 260 companies, and the state governments thousands more, involved in activities ranging from generating nuclear power to making condoms.

Some of them, including Oil & Natural Gas Corp and Steel Authority of India, are successful, but dozens of others have been bleeding cash for decades and been kept afloat by budgetary support each year.

Cabinet secretary Ajit Seth has called a meeting of top officials to consider what to do with the 10 firms that make the biggest losses. They had a combined net loss of Rs24,500 crore in 2012-13.

The list includes Bharat Sanchar Nigam Ltd, Mahanagar Telephone Nigam Ltd, Air India, Hindustan Photofilms and Hindustan Fertiliser Corp, according to a note prepared by the department of public enterprises.

Officials at the department have drawn up proposals to close some of these, which will most likely include Hindustan Photofilms set up in 1960 to make film rolls and take on the likes of Kodak, but was declared a sick company in 1996 and recommended for closure by the department in 2003 on the ground that it could not compete with private players.

The company, based in the southern town of Ottacamund in the Nilgiri hills, went to court and won a stay order on any further proceedings that could lead to its closure.

In 2010 the firm proposed a recovery plan but the government has been sitting on it, with no decision having been made since about the company's future. In the meantime the company's accumulated losses have piled up to Rs8,232 crore, about 40 times its paid-up capital.

"There is no future for this company in the current environment. It is a fit case for winding down," said a government official at the department of public enterprises, which is overseeing the privatisation of state firms. The official did not wish to be named due to the sensitivity of the matter.

The department will be making a presentation at Tuesday's meeting.

The government is also considering a proposal to wind down the watch-making division of Hindustan Machine Tools Ltd (HMT) after years of losses that have forced it to borrow from the government to pay wages.

Trade unions are opposed to any moves to shut down state firms and the Bharatiya Mazadoor Sangh (BMS), a body affiliated to the ruling Bharatiya Janata Party, said it would work with other unions to block the move.

The government increased its privatisation target for its fiscal year 2014-15 budget to Rs63,000 crore from the interim budget's target of Rs48,000 crore. The target is nearly four times larger than total government divestments in the past four years.

Officials said the government was also looking for ways to revive some of the sick companies through capital infusion, joint ventures and by bringing in new management.